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A New Tax Regulation that Accelerates Expenses? Yes, Please!

Posted on Dec 9, 2015

By Christie Streit, CPA

My husband and I just opened our first restaurant, and we were very excited to hear the IRS came out with a new tax regulation that would actually benefit us. The new rule allows private companies to increase the de minimis safe harbor threshold from $500 to $2,500 for companies without audited financial statements.

In other words, companies can expense items that do not exceed $2,500 per invoice (or per item as substantiated by the invoice).

As you can imagine (and many of you can relate) there are numerous purchases required to start a new small business. The happy result for us is that we can now expense tables, televisions, shuffleboard, and many more purchases that are individually under $2,500.

The new standard is effective January 1, 2016; however, the Journal of Accountancy article noted the following: “The new de minimis amount applies to costs for tax years beginning on or after Jan. 1, 2016, but the IRS will not raise the issue of a higher amount during an audit for earlier tax years and will not further pursue the issue for any tax year beginning after Dec. 31, 2011, and ending before Jan. 1, 2016, for any case pending in IRS examination, Appeals, or the Tax Court.”

The tax payer must have a policy in place effective January 1,of the tax year in which they would like to take advantage of the new ruling.